Kakao Talk is pretty popular. As is WhatsApp. Then there's TextPlus and TextOne which is in beta and not fully compatible with iPhones, but it's on its way.
Practically all these apps merge the ideas of SMS with internet chat, because they're essentially the same thing when you use the internet to message people.
Android Market will have more to choose from. Remember, that although the messages you send will be free, you may have to pay a small amount for some of the apps. Also, you'll need an internet/data connection to send/receive messages from them.
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